Yesterday was a particularly quiet trading session with the US Labour Day holiday. The poor European and UK data did not worry markets too much which, in the main, were taking a little nap. Bond Yields were fractionally lower whilst the Dollar ended higher and the Japanese Yen again underperforming. It was even predominantly quiet on the geopolitical front. It is now back to work for the US markets as yesterday’s holiday marks the end of the Northern Summer Season which raises hope for a pick-up in market activity and an implementation of fresh ideas and positions. We can live in hope anyway!
German Final GDP was unchanged in Q2 at -0.2%, driven by soft domestic demand and countered by higher net exports, but it was the soft final PMI’s which captured most of the attention with the Final Manufacturing PMI the lowest since July 2013. On top of this, Italy’s outcome was a net contraction, the first since June 2013. The prices component was also subdued. There was an increase in chatter yesterday with regard to the ECB not only cutting rates this week but possibly even starting an ABS purchasing programme.
The UK PMI was also soft raising concerns about a slump in growth, which had been doing so well, with the prior month also revised lower. At least the Credit Numbers were better than expected providing some support for the economy.
This morning on the economic front we have UK Construction PMI at 9.30 am. At 2.45 pm we have US Manufacturing PMI and this is followed at 3 pm by US ISM and Construction Spending. Also at 3 pm the ECB’s, Knot will give a lecture in the Hague which will be closely watched by the markets for any further clues as to what the ECB will do at Thursday’s upcoming Meeting.
September S&P 500
The S&P is again testing new highs this morning on the basis that ‘no news is good news’ with the US traders finally back at their desks this afternoon after what seems like an endless vacation for the markets over the last few weeks. The S&P is currently trading at top of its Williams Index but not its Bollinger Band and for this reason I will move my sell level higher to 2009/2013 with a 2016 stop. Given how overbought and overstretched the market is trading I am going to leave my buy level the same at 1991/1996 with a 1987 stop, which is just below last week’s low. Just as an aside, when the the S&P topped in 1929 it did so on the first trading session after the Labor Day Holiday! And take note, traditionally September is the weakest month of the year for the US stock market.
Euro/USD
This morning the Euro is trading at my 1.3120 buy level. I am now long and I will leave my stop the same at 1.3075. The market is trading at the bottom of its Bollinger Band but interestingly the Williams Index is trying to turn higher hopefully giving me some comfort with this long position. However as I have mentioned over the last week we will have to get Dragi and the ECB Meeting out of the way on Thursday before the Euro will hopefully be able to break higher.
US Dollar Index
No change as I am still short the Dollar Index in small size at 8275 with the same 8330 stop as the Dollar is trying to test the key 8300 level this morning.
September Dax
The Dax plan worked well yesterday as shortly after I posted it traded down to my 9440 buy level. After a nice rally overnight I have cut this position this morning at 9520 and I am now flat. As I mentioned yesterday I expect the Dax to rally ahead of Thursday’s key ECB Meeting and for this reason I do not want to be short the market at this time. Today I will raise my buy level to 9460/9495 with a 9420 stop which is just below yesterday’s low.
September FTSE
The FTSE is also trying to break higher this morning as it tries to play ‘catchup’ with the other major World Indices. I am still flat the market after last Friday’s gain and today I will raise my buy level to 6785/6815 with a 6770 stop which is just below last Friday’s low. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow is also trying to break higher this morning. I am still flat and today I will be a small seller on any further rally to 17160/17200 with a 17230 stop Given how overbought the Dow is trading I still do not want to be long the market at this time.
September BUND
No change as I am still a small buyer on any dip to 150.80/151.10 with a tight 150.65 stop. Given how overbought the Bund is trading I will lower my sell level slightly to 151.70/152.00 with a 152.25 stop.
Gold Rolling Contract
Overnight Gold traded down to my 1278 buy level. It is trading heavy this morning on the back of the stronger equity market and I will leave my stop the same at 1269. If I am stopped out of this position I will be a more aggressive buyer in front of 1258 with a 1249 stop.
Silver Rolling Contract
No change as I am still long from last week at 19.40 as so far Silver is holding in better than Gold at this time. I will leave my stop the same at 19.10 and again if I am stopped out of this position I will be a more aggressive buyer in front of 18.70 with a 18.25 stop.
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